many will say they have value of course, studies of round numbers show they have no more value than any other number. I have posted such a published longterm study at least 1-2 times in the past here Do a serious backtest of at least 100-150 examples of different instruments (at different times/dates!) comparing to other numbers using the 50% retracement. You will find they are nothing special. If you are going to buy retracements, don't focus on a number. It is likely more useful to examine that instrument's recent movements as well as S/R...
I agree that the 50% Fib level is a good place to start looking for a retrace. I prefer to use the .618% instead. Use this as a springboard to the 1st Fib extention levels as a profit target. Just look at a 5 min chart for QQQQ. Most days if it gaps open, plot the fibs on the previous days close and the first S/R during the opening 30 minutes. You will see it bounce off the fib levels (.382 or .618) then continue in the opening direction to the extention levels.
Why not 49% Why not 47% Why not 46% Why not 45% Why not 43% Why not 35% Why not 22% Why not 18% Why not 15% Why not 11% Why not 9% Why not 4% Why not 3% Why not 2% Why not 1% Why . . . because THEY ALL WORK SOMETIMES!!! Why not look for consistency instead of occasional similarity to randomness. It's absolutely no wonder over 90% of traders fail.
the fifty t0 60 zone is very reliable to use as a pullback or retracement buy/sell zone. If you're fib lines aren't working for you, you might not be drawing them correctly. Try going from an all time high, to an all time low, or the beginning of a rally to its finish. Spend a little time and you'll be a convert in no time.
proflogic, take a look through historic charts and watch some live and you'll see how they work. I think it's based on psychology and of course the fibonacci sequence. Hey, the ratio of male bees to female is the number PHI, and it so happens that the ratio between when traders psychology recongnizes a time to sell and buy is the number phi. There's also a very practical side to it. Some people double down, so when price moves back 50%, that's a chance for them to get out at break even, so we can get a support resistance line there. 50% is also a big number/area that alot of people can see and look at, kind of like how a big round number can become support/resistance. Here I"ll post a picture of some fib retracements/ pullback from last night, I've got my fib lines set to show only the fifty - 61.8 zone:
the above picture is by no means a great example, but a real one from last night. This zone is a place to take a stand, up or down. You'll have to develop your own rules on how to trade them. I look for a close below the low candle into the zone. This example would have been good for about 15 points on the YM.
To make this as simple as possible. By definition a "retracement means you have a continuing trend. A retracement that fails is called a trend change or trend end. So a retracement has to stop some where. In its most simple form a trend is a 45 degree slope. A slope in trading has some width to it, called a channel. A chart represents territory. In a 45 degree downtrend the top of the channel at many points will coincide with a 50% retracement. If the retracement is greater then you lose your 45 degree angle and a possible trend change. In trends that slope at 45 degrees you will get more 50% retracements. Trends sloping at 30 degrees or 60 degrees will provide less 50% retracements but more retracements at 38 /61 Fib numbers
Here is the truth. It's a 47.2% retracement not 50%. But the trick is you have to put your finger on the screen and say, "don't even think about it Mr. Candle!".
That's interesting about the angles, but I find it's the steeper, faster mini rallies that tend to be more reliable at tht 50 60ish zone.